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Aymond v. Citizens Progressive Bank

Court of Appeals of Louisiana, Second Circuit

June 26, 2019


          Appealed from the Fifth Judicial District Court for the Parish of Franklin, Louisiana Trial Court No. 43, 818-A Honorable Anne L. Simon (Ad Hoc), Judge

          SEDRIC E. BANKS Counsel for Appellants S. HUTTON BANKS

          MIXON, CARROLL & FRAZIER, PLLC Counsel for Appellee, By: James L. Carroll Citizens Progressive James E. Mixon Bank Rossanna Rahim McIlwain

          PETTIETTE, ARMAND, DUNKELMAN, Counsel for Third Party WOODLEY, BYRD & CROMWELL, Appellee, Commercial LLC. Capital Bank By: Joseph S. Woodley

          COTTON, BOLTON, HOYCHICK Counsel for Appellee, & DOUGHTY Judge Terry A. Doughty By: David P. Doughty

          Before PITMAN, COX, and THOMPSON, JJ.

          PITMAN, J.

         Plaintiffs[1] KT Farms Partnership II, Thad Kyle Investments, LLC, William C. Aymond ("Billy"), Hillary Herron ("Hillary"), and Garrett Aymond ("Garrett"), appeal judgments sustaining an exception of res judicata and granting motions for summary judgment filed by Defendant Citizens Progressive Bank ("Citizens") and Third Party Defendant, Commercial Capital Bank ("Commercial") and dismissing them from the suit. Plaintiffs also appeal several interlocutory judgments. For the following reasons, the judgments are affirmed and Citizens's request for attorney fees under La. C.C.P. art. 2164 is denied.


         William Kyle Aymond ("Kyle") and Thad Herron ("Thad") organized a number of business entities to conduct a farming operation in Franklin and Tensas Parishes. The entities included KT Farms Partnership ("KT"); KT Farms Partnership II ("KT II"); KT Planting Partnership; Ruby-Jane, LLC; Pecan Brake, LLC; South Franklin Investments, LLC; and Thad Kyle Investments, LLC ("TKI"). Each year from 2008 through 2011, one or more of these entities obtained and repaid a crop loan from Citizens, which did not make any crop loans to Kyle and Thad personally.

         In 2012, Citizens and other participating banks issued a crop loan to KT and KT II. After all proceeds from the 2012 crop had been applied to the loan, a balance of $2, 975, 909.50 remained due (the "Carry Over Loan"). At KT's request, Citizens agreed to refinance the balance due, but required collateral to secure the loan. The Carry Over Loan was made solely to KT as borrower, based on collateral pledged by KT Planting Partnership; Ruby-Jane, LLC; South Franklin Investments, LLC; TKI; KT; and KT II. Kyle and Thad also personally guaranteed the amount of the Carry Over Loan. KT and KT II made payments on the Carry Over Loan, and it was refinanced by Citizens in a new credit agreement for the remaining balance of $1, 320, 883.75 in March 2014. The new maturity date was March 17, 2015.

         The Carry Over Loan was not paid when it matured in March 2015, and KT did not make arrangements to renew it. Citizens foreclosed on some of the collateral pledged by KT to secure the loan and filed two suits in the Fifth Judicial District Court - Citizens Progressive Bank v. KT Farms Partnership, et al., Docket No. 44, 227, (which foreclosed on land belonging to the defendants in that suit), and Citizens Progressive Bank v. KT Farms Partnership, et al., Docket No. 44, 604, (which foreclosed on equipment). None of the defendants in either suit appeared at the foreclosure proceedings to object or raise any defense to the actions. As a result, the Carry Over Loan was paid in full.

         In 2013, after initially failing to secure a crop loan, KT reapplied to Citizens for a crop loan after the president of Commercial advised Gary Sanford, the president of Citizens, that Commercial would participate in a 2013 crop loan provided that the borrowing entity was not KT, which had an outstanding loan with Commercial and its lending limits prevented another loan to the same borrower. The lenders, Citizens, Commercial and Caldwell Bank and Trust Company ("Caldwell"), agreed to issue a 2013 crop loan (the "Crop Loan") to Garrett and Hillary (the children of Kyle and Thad) and Billy (Kyle's father). The $4.7 million line of credit established in the names of Billy, Garrett, and Hillary was secured by the remaining collateral pledged as security for the Carry Over Loan. Neither Kyle, Thad, nor any of their related entities, applied to Citizens as borrowers for the Crop Loan. Later, Citizens also issued a $300, 000 supplemental 2013 Crop Loan to Billy, Garrett and Hillary under the same conditions as those relating to the $4.7 million line of credit.

         Citizens and Commercial drafted 13 written "Loan Requirements," which were included in the promissory note for the Crop Loan. A separate document containing the loan requirements was signed by Kyle, Thad, the Crop Loan borrowers (Billy, Garrett and Hillary), and Sanford (the banker). In March 2014, the $4.7 million Crop Loan and $300, 000 supplement was paid in full and Citizens's lien was cancelled.

         In October 2014, Plaintiffs (including others later dismissed from the suit), filed a petition for damages against Citizens, alleging breach of the Loan Requirements. They also alleged bad faith performance of written credit agreements, fraud and conversion of their farming business "lock, stock and barrel." They further alleged that their business had been fraudulently manipulated into liquidation. After filing exceptions of vagueness and no cause and no right of action, Citizens answered the original suit and filed a third party demand against Commercial.

         The trial court granted Citizens's exception of vagueness, ordered Plaintiffs to amend their petition and deferred consideration of the other exceptions. Plaintiffs filed an amended petition adding Billy; KT Planting Partnership; Ruby-Jane, LLC; Pecan Brake, LLC; South Franklin Investments, LLC; and TKI; as party plaintiffs. Citizens again filed exceptions of vagueness, no cause and no right of action and failure to join an indispensable party. The trial court denied its exceptions of vagueness, failure to join an indispensable party and no cause of action.

         After a hearing on the exception of no right of action, the trial court issued written reasons for judgment and found that neither the Loan Requirements drafted by Citizens, nor the promissory note, contained any language to indicate that the Crop Loan was made for the benefit of any person other than the named makers. As a result, it determined that the Loan Requirements did not set forth a stipulation pour autrui in favor of Kyle and Thad, the nonmaker plaintiffs, because the contract language did not manifest a clear intent to benefit a third party. It further found that the Loan Requirements restricted the use of the loan proceeds and were not benefits. It rendered judgment granting Citizens's exception of no right of action and dismissed the claims of all plaintiffs except the named borrowers. This decision was appealed to this court.

         In Aymond v. Citizens Progressive Bank, 50, 825 (La.App. 2 Cir. 9/16/16), 206 So.3d 330, this court affirmed the judgment in part and found that Kyle and Thad had failed to satisfy their burden of proving that they were third party beneficiaries of the Crop Loan. This court also rendered judgment reversing the trial court's action in part and determined that KT II and TKI both had a right of action. Therefore, this court found that the only viable plaintiffs in the action on the Crop Loan were Billy, Garrett, Hillary, KT II and TKI. In all other regards, the judgment was affirmed and the matter remanded for further proceedings.

         A motion to recuse the trial judge was filed, and, while it was pending, in September 2017, the sitting judge signed a "Discovery and Trial Scheduling Order" and set the matter for trial for March 26, 2018. This scheduling order included that "all amendments to pleading shall be filed on or before October 2, 2017."

         The Louisiana Supreme Court appointed a judge ad hoc to hear the case. Litigation continued before the ad hoc judge and several interlocutory judgments were rendered which denied discovery requests, granted and denied sanctions, disallowed Plaintiffs' attempt to file a third amending and supplemental petition (which expanded the allegations) and denied motions for summary judgment. In an effort to streamline the litigation which had been ongoing for some time and in which there were many outstanding motions, the ad hoc judge issued an order that all parties would consolidate previously and timely filed dispositive motions into one motion, file a brief not to exceed 15 pages and attach appropriate exhibits.

         Third Amending and Supplemental Petition and Res Judicata

         On October 2, 2017, in accordance with the scheduling order, Plaintiffs attempted to file a 34-page "Third Amending and Supplemental Petition" without leave of court, sought to add four defendants and alleged for the first time that "Sanford and Adams acted, both individually and in concert in order to conceal plaintiffs' digitalized, unredacted, loan histories at Citizens covering calendar years 2011, 2012, 2013 and 2014." Plaintiffs claimed these allegations were prima facie evidence of fraudulent manipulation and malicious interference with fair and good faith performance of the credit agreements and Loan Requirements at issue.

         The trial court struck the third amending and supplemental petition on December 15, 2017, and ruled that the pleading was to be treated as "not filed." In conjunction with this decision, it determined that issues raised therein dealt only with matters concerning the Carry Over Loan, which had previously been settled as a result of the two foreclosure suits brought in the Fifth Judicial District Court. It decided that since no issues raised in the original petition or in the first amended and supplemental petition dealt with the Carry Over Loan, those claims were irrelevant to the case at bar. It sustained an exception of res judicata and precluded any discussion of the Carry Over Loan and any matter outside the scope of the credit agreement between the parties regarding the Crop Loan.

         Discovery and Contempt Rulings

         A motion hearing was held on February 27, 2018, at which time both Citizens and Plaintiffs appeared to be missing some discovery items from the opposite party. Therefore, although the deadline for discovery established by the previous trial judge had long since passed, the ad hoc judge allowed each party to request a few specific items within the next three days and the opposing party was to supply those items within five days thereafter. Depositions were limited to those new responses alone. The judge made it clear that full scale discovery was not being reopened and that the discovery being allowed was limited in nature.

         On March 2, 2018, Plaintiffs responded by sending 78 requests for production, which were recognized by the trial court as being far beyond the letter and spirit of the newly permitted discovery. Citizens filed a motion to strike and/or motion for a protective order against Plaintiffs' supplemental discovery requests and a motion for partial protective order against Plaintiffs' notice of Citizens's deposition dated March 14, 2018. Plaintiffs filed a motion to hold Citizens in constructive contempt of court and requested sanctions and other relief.

         Citizens submitted Exhibit E for an in-camera inspection and made a motion to have the court seal it as attorney work product. The trial court determined that the document was privileged work product and did not consider the contents in either preparation for the February 27, 2018 hearing or in any discovery decisions made. Citizens withdrew its motion to seal Exhibit E; however, the trial court did seal it for appellate review. This decision to look at evidence that was eventually sealed forms the basis of one of the assignments of error in this appeal.

         On February 27, 2018, as memorialized in the judgment filed on March 12, 2018, the trial court addressed Plaintiffs' motion to hold Citizens in contempt and for sanctions. It stated that of the 1, 700 pages of documents requested by Plaintiffs, most dealt with a loan not at issue in this matter, were previously disclosed or were not mentioned until Plaintiffs sought to depose someone. Citizens had objected to any discussion of claims related to the Carry Over Loan since it had been satisfied through the foreclosure proceedings brought in the Fifth Judicial District Court. Citizens made an objection in a brief in support of its motion for summary judgment and raised the issue as res judicata.

         The trial court examined Plaintiffs' original petition and the first supplemental and amending petition and determined that claims related to loans concluded by foreclosure in Fifth Judicial District Court Docket No. 44, 604 were not material to the instant inquiry. It took judicial notice of the existence of the foreclosure, which concluded the matter of the Carry Over Loan, and then granted the peremptory exception of res judicata made by Citizens. On the court's own motion, it recognized only causes of action alleged in Plaintiffs' original and first amended and supplemental petitions relating to the Crop Loan. Because the trial court took judicial notice of Docket No. 44, 604 of the Fifth Judicial District Court (the foreclosure of equipment), the record of that case has been included in this appellate record.

         Motions for Summary Judgment

         Commercial filed a motion for summary judgment against the third party demand of Citizens filed October 13, 2017; it filed a supplemental motion for summary judgment on February 15, 2018; and it filed a consolidated motion for summary judgment on March 16, 2018. Plaintiffs filed a motion to strike Commercial's motion for summary judgment on March 19, 2018.

         Citizens filed a motion for summary judgment on October 13, 2017, and then filed a consolidated motion for summary judgment on March 21, 2018.

         Plaintiffs filed a motion for summary judgment and a supplemental memo in support thereof on October 13, 2017. On March 21, 2018, they filed a consolidated brief "recross motions for summary judgment" and a motion to strike Defendant's application for summary judgment pursuant to La. C.C.P. art. 967(C).

         On March 28, 2018, the trial court held a hearing and issued a judgment and reasons for judgment that were filed May 7, 2018. It noted that the causes of action at issue on March 28, 2018, pertained only to the Crop Loan.

         Commercial's motions for summary judgment were addressed first, and the trial court noted that on February 27, 2018, it had granted partial summary judgment in favor of Commercial and against Plaintiffs, but that that decision was in error since Plaintiffs did not bring a cause of action against Commercial. That judgment was vacated. Further consideration of Commercial's motions was pretermitted until the trial court ruled on Citizens's motions.

         The trial court addressed Citizens's motions and stated that Plaintiffs had stated four causes of action against Citizens in their original and first amending and supplemental petition: (1) breach of contract of the written credit agreement, (2) fraud, (3) bad faith, and (4) wrongful conversion to take over Plaintiffs' farming operation. Citizens had filed a third party demand against Commercial as a participant in the loan agreement, seeking its pro rata share of any judgment that might be rendered against Citizens.

         The trial court reviewed the evidence presented by Plaintiffs in support of their claims and considered Citizens's motions for summary judgment and decided that Citizens had pointed out to the court the absence of factual support for one or more elements essential to Plaintiffs' claims necessary to show breach, fraud, bad faith or wrongful conversion. In rendering its judgment, it specifically addressed Plaintiffs' arguments that Citizens had breached its contract by failing to fulfill the obligations in the Loan Requirements. It delineated each specific obligation and how Citizens was alleged to have breached the agreement. It found that Plaintiffs would be unable to prove their claims on the breach issue. Further, it addressed the allegations of bad faith, fraud and conversion and granted Citizens's motion for summary judgment.

         After granting Citizens's motion, the trial court revisited Commercial's motions for summary judgment, granted the motions and dismissed Commercial with prejudice as a third party defendant.

         The trial court denied all of Plaintiffs' motions and noted that the ones filed in February and March 2018 alleged new causes of action and were entirely new motions for summary judgment, in violation of the discovery and scheduling order issued by a prior judgment in the case in September 2017. It found that the allegations were not rooted in the four corners of the written credit agreement and inferred liability from the past relationship between the parties and other external evidence. It also found that Plaintiffs had failed to raise any genuine issues of material fact and denied their motions for summary judgment. It granted Citizen's motion to strike Plaintiffs' motion for summary judgment filed March 21, 2018.

         Plaintiffs filed a petition to appeal the judgment of many of the trial court's interlocutory rulings and those related to res judicata and the motions for summary judgment through which their suit was dismissed. After the appeal was granted, motions were filed by Citizens to strike the record of Fifth Judicial District Court Docket No. 44, 604, which was filed in the instant appellate record, and/or to add the record from Fifth Judicial District Court Docket No. 44, 227, the other foreclosure case. The trial court allowed the record to be supplemented with Docket No. 44, 604, but not Docket No. 44, 227. A motion was filed with this court, and an order was rendered on March 8, 2019, denying Citizens's motion to strike Docket No. 44, 604 from the record and denying its alternate motion to supplement the appellate record with Docket No. 44, 227.

         Plaintiffs appeal the foregoing interlocutory and final judgments of the trial court.


         Most of the interlocutory rulings raised as error by Plaintiffs have previously been considered by this court under its supervisory jurisdiction and writs were denied. For the sake of judicial economy, we will address the ones that have a bearing on other decisions first.

         Motion to Strike the Third Supplemental and Amending Petition

         Plaintiffs argue that the trial court erred in granting Citizens's and Commercial's motion to strike Plaintiffs' third amending and supplemental petition, which they attempted to file on October 2, 2017, without first requesting leave of court. They contend that this was error since they could not have timely requested leave to amend on the day the scheduling order was signed on September 19, 2017, and the scheduling order required them to file any amendment by October 2, 2017. Plaintiffs asssert that the requirements of "reasonable notice" under La. C.C.P. art. 1151 and delays imposed by District Court Rule 9.9 prohibited compliance with the scheduling order because those time delays would have required them to file the petition four days before the scheduling order was even signed.

         Plaintiffs further argue that Citizens and Commercial were to blame for belatedly producing documents and that an extension of time for them to review those documents and conduct depositions should have been granted. They assert that the trial court's reliance on the former judge's deadline for amending pleadings was an abuse of discretion.

         Succinctly stated, Citizens argues that an amended petition filed without leave of court, when such permission is required, may not be considered.

         Commercial also filed a brief in opposition to this particular assignment of error arguing that La. C.C.P. art. 1151 provides only two scenarios in which a plaintiff may amend his petition without leave of court ‒ before the answer is served and when the court orders a plaintiff to amend after an exception is granted. Otherwise, permission from the court or consent of the parties is required. Commercial contends that Plaintiffs' attempt to file a third amended petition was intended as a dilatory tactic and would have resulted in the upsetting of the trial date and undue delay to Commercial's prejudice. Commercial asserts that the trial court correctly struck the Plaintiffs' third amending and supplemental petition.

La. C.C.P. art. 1151 states in pertinent part as follows:
A plaintiff may amend his petition without leave of court at any time before the answer thereto is served. He may be ordered to amend his petition under Articles 932 through 934. A defendant may amend his answer once without leave of court at any time within ten days after it has been served. Otherwise, the petition and answer ...

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